The opinion of the court was delivered by: VANARTSDALEN
MEMORANDUM OPINION AND ORDER
This is an action of statutory interpleader joining fifteen potential adverse claimants to the sum of $ 19,654.24 held by plaintiff. Jurisdiction is alleged under 28 U.S.C. § 1335 and venue pursuant to 28 U.S.C. § 1397. Defendant, New Jersey State Employment Security Agency (ESA), a division of the New Jersey Department of Labor and Industry, has asserted a counterclaim against the plaintiff in the amount of $ 30,675.19 plus interest.
ESA has also filed, pursuant to Rule 56, Fed.R.Civ.P., a motion for summary judgment on both the claim and its counterclaim.
There were originally filed on behalf of the other defendants answers, counterclaims, and cross claims, all of which will be dismissed as a consequence of the ruling hereafter made with respect to ESA's motion for summary judgment. It should also be noted that none of the other defendants has opposed ESA's claim to the whole amount.
As stated by the Court in Poller v. Columbia Broadcasting System, Inc., et al., 368 U.S. 464, 467, 82 S. Ct. 486, 488, 7 L. Ed. 2d 458 (1962):
Summary judgment shall be entered only when the pleadings, depositions, affidavits, and admissions filed in the case "show that (except as to the amount of damages) there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.Rules Civ.Proc. ....
For reasons that will follow, ESA's motion for summary judgment on both claims will be granted.
The dispute revolves around six checks in the total amount of $ 50,329.43. The defendants are the six drawers of these checks, and the respective banks on which the checks were drawn, a collecting bank, ESA which is the asserted payee of each of the checks, and Ann Gabauer, an employee of ESA whose illegal actions in relation to each of the checks resulted in this litigation.
The drawers of the six checks mailed the checks to ESA for the purpose of satisfying their employment tax obligations to the State of New Jersey. The checks upon delivery to ESA came into the hands of defendant, Ann Gabauer, an audit clerk of ESA whose duties were to receive mail, open it, review the enclosed tax reports, compare the checks, if any, with the enclosed tax reports, and sort the reports and checks for further processing. (Ripley affidavit, P 3, Exhibit C to Exhibits in support of defendant ESA's motion for summary judgment).
Ms. Gabauer was employed by ESA from April 13, 1976 to July 22, 1976. According to the information of the plaintiff, as stated at page 4 of the affidavit of William R. Bonetz, assistant vice president for Branch Operations of Commonwealth Federal Savings and Loan Association of Norristown, Pennsylvania:
Anne Gabauer was arrested in May, 1974 on two counts of embezzlement. She was arrested or indicted on February 10, 1976 on two counts of fraud and again on March 11, 1976 for embezzlement. On May 5, 1976, she was arrested and subsequently indicted for possession of stolen property. On July 14, 1976, she pleaded guilty to five counts of fraud in connection with bad checks.
The record is barren as to any investigation that may have been made with respect to her qualifications for the position for which she was hired by ESA, but it obviously was not very thorough. All of the six checks involved were eventually deposited to her account in the plaintiff bank.
On or about May 13, 1976, one month after she was hired, Ann Gabauer opened a savings account with plaintiff, Commonwealth Federal Savings and Loan Association of Norristown, Pennsylvania. She deposited into that account a check in the amount of $ 11,973.00 drawn by Viking Yacht Company on the Peoples Bank of New Jersey. Attached hereto as Check # 1 is a Xerox copy of the check which shows on its face the words "N. J. Employment Security," the date, check number, amount and payee's name printed in matching, heavy block letters. The words "N. J. Employment Security" appeared about 1/2 inch above the words "To the Order of," after which words, in small type, appears A. E. Gabauer. As stated in plaintiff's response to the motion for summary judgment, page 3:
Presumably, the person at Viking Yacht who made the check failed to align the machine properly so as to put these words in the appropriate place.
Nevertheless, the check was endorsed in the name A. E. Gabauer and deposited to her account in plaintiff bank.
On or about June 2, 1976, Ms. Gabauer deposited to her account a check in the amount of $ 3,484.54 drawn by Farber Bros. Supply Co., on The National State Bank, Elizabeth, New Jersey. On the face of the check, a copy of which is attached hereto as Check # 2, appear the printed words "Pay to the order of" followed by the handwritten words "N. J. Employment Agency" immediately under which in handwriting obviously different, were the words "or Anne Gabauer." The check was endorsed "Ann E. Gabauer," and deposited to her account in plaintiff bank.
DB Communications drew a check on the Marine National Bank of Wildwood, New Jersey, in the sum of $ 417.48. It is handwritten and almost illegible. The payee apparently was originally "N. J. Security Agcy," but the lettering was obviously tampered with and endorsed only by "Ann E. Gabauer," and deposited to her account in plaintiff bank. A copy of this check is attached hereto as Check # 3.
On or about June 6, 1976, Ann Gabauer deposited to her account a check in the amount of $ 1,449.91, drawn by John Lee on Barclay's Bank of New York, and payable to "N. J. Employment Security Agency," a copy of which is attached hereto as Check # 4. On the back of the check were the words "Pay to the Order of Ann E. Gabauer, Joseph P. Sutton" and the signature, "Ann E. Gabauer." Nowhere in the endorsement does the name of the payee appear.
On June 16, 1976, Ms. Gabauer deposited to her account in plaintiff bank a check in the amount of $ 5,698.13, drawn by C. Cosentino Company, Inc., on First National Bank of New Jersey, Paterson, New Jersey, and payable to N. J. Employment Security Agency. The endorsement on the back of the check stated: "Pay to the Order of Ann Gabauer," and immediately thereunder, "John Brennan," under which appears the name Ann E. Gabauer. Nowhere in this endorsement appears the name of the payee, although it is clear from the face of the check that the purpose of the drawer was to pay certain taxes to the named payee, "N. J. Employment Security Agency." In the upper left part of this check, a copy of which is attached hereto as Check # 5, are the printed words "C. Cosentino Company, Inc., Tax Account," and immediately above the signature line of the drawer the same words appear. Apparently, the question of why a state tax collecting agency in New Jersey would transfer tax dollars to an individual in Pennsylvania never occurred to the plaintiff's teller who accepted the endorsement and deposited the check to the personal account of Ann Gabauer.
On July 1, 1976, Ann Gabauer deposited to her account another check, a copy of which is attached hereto as Check # 6, in the amount of $ 27,306.37, drawn by Tailored Skirts Company of North Bergen, New Jersey, on Garden State National Bank, Paramus, New Jersey, payable to New Jersey Employment Security Agency. On the back of the check appeared the endorsement, "Pay to the Order of Ann Gabauer," followed by the name, "Joseph T. Harding," under which appeared the endorsement of Ann E. Gabauer. Nowhere in the endorsement appeared the name of the payee, New Jersey Employment Security Agency.
Within the short time between April 13, 1976 and July 22, 1976, Ann Gabauer had credited to her personal account in the plaintiff bank on the basis of the six checks, the sum of $ 50,329.43. Within the shorter period of May 21, 1976, to July 12, 1976, this enterprising individual withdrew from her account the sum of $ 30,800.00, leaving in the account the sum of $ 19,654.24, which represented a part of the proceeds of the $ 27,306.37 check of Tailored Skirts Company, the last check deposited.
Ms. Gabauer's defalcations were discovered when a taxpayer, notified by ESA of claimed overdue employment tax, responded that the tax had been paid and presented a cancelled check to prove it. (Marino affidavit P 13, Exhibit "F" to the motion for summary judgment).
On October 16, 1976, ESA informed plaintiff that Ann Gabauer had converted the checks and deposited them to her account, and therefore demanded payment from plaintiff of $ 50,329.43. (Complaint, P 23). Plaintiff thereupon filed the present interpleader action, including as a defendant, Ms. Gabauer, with respect to whom it is stated at page 5 of plaintiff's response to the pending motion for summary judgment:
The State of New Jersey indicted Ann Gabauer for the thefts of these checks, and on June 30, 1978, Ms. Gabauer pleaded guilty to the indictment. She is now incarcerated at the Women's Correctional Institute at Clinton, New Jersey, serving a term of from seven to ten years.
With respect to the merits of the case, Exhibit "I" in support of the motion for summary judgment, is the affidavit of James A. Ware, Assistant Commissioner, Income Security, Department of Labor and Industry for the State of New Jersey, executed September 25, 1978. In this affidavit appears the statement:
4. The New Jersey State Employment Security Agency has no outstanding claims against the six employers named in Paragraph 3 relating to the six checks which are the subject matter of this action.
The motion for summary judgment is based upon:
(a) The pleadings and documents ...